The Australian Dollar (AUD) encountered volatility during Wednesday’s Asian session, with the AUD/USD pair gaining ground in the wake of the New Zealand Dollar‘s (NZD) appreciation. This surge followed the Reserve Bank of New Zealand’s (RBNZ) decision to maintain its Official Cash Rate (OCR) at 5.5%. The close relationship between the AUD and NZD, bolstered by geographical proximity and robust trade ties, underscores the impact of such decisions on both currencies.
Investor attention remains focused on the Reserve Bank of Australia‘s (RBA) monetary policy outlook. Recent RBA Meeting Minutes hinted at deliberations regarding a potential rate hike in May, though the board ultimately opted for a steady policy stance. The ambiguity surrounding future rate adjustments underscores the complexity of the economic landscape.
Australia’s Q1 inflation rate, at 3.6% year-over-year, surpassed market expectations despite a slight decrease from the previous period. This uptick in inflation, highlighted in the RBA’s May policy meeting, has prompted renewed discussions about the possibility of an interest rate increase.
Meanwhile, traders await insights from the Federal Open Market Committee (FOMC) meeting minutes, scheduled for release on Wednesday, to gauge the Federal Reserve’s (Fed) policy stance. The Fed maintains a cautious approach towards inflation and the prospect of rate adjustments in 2024.
Market Movers:
The ASX 200 Index rallied near 7,860 on Wednesday, propelled by gains in mining stocks amid robust metals prices. Positive sentiment also mirrored overnight gains on Wall Street, with the S&P 500 and Nasdaq Composite reaching new record highs.
Federal Reserve Bank of Boston President Susan Collins emphasized patience as the appropriate policy for the Fed, suggesting a gradual approach to interest rate adjustments.
Federal Reserve Governor Christopher Waller expressed the need for sustained favorable inflation data before considering a policy easing.
The probability of a 25 basis-point rate cut by the Federal Reserve in September has seen a slight increase, reflecting evolving market sentiments.
Australia’s Westpac Consumer Confidence declined marginally in May, marking the third consecutive month of decrease but at a slower pace.
The Chinese Commerce Ministry’s announcement of restrictions on a US company’s import-export activities underscores ongoing trade tensions between the US and China, potentially influencing the Australian market.
Technical Analysis:
The AUD/USD pair, trading around 0.6680, exhibits a bullish bias on the daily chart, consolidating within an ascending triangle pattern. The 14-day Relative Strength Index (RSI) remains above 50, indicating positive momentum.
A breach above the psychological level of 0.6700 could lead to further upside, with potential targets at 0.6714 and 0.6725.
Conversely, the nine-day Exponential Moving Average (EMA) at 0.6655 serves as immediate support, followed by the lower boundary of the ascending triangle at 0.6650. A breakdown below these levels could push the pair towards 0.6600.
